The dollar was higher against the euro and the pound Tuesday following a report that showed U.S. consumer confidence fell sharply in February, snapping a three-month streak of improvement. The downbeat figures sparked concern over the strength in economic recovery, triggering investors to turn to the buck for its safe haven appeal.

What's moving the market: Fed chairman Ben Bernanke appeared on Capitol Hill Wednesday to begin his two-day semi-annual monetary policy testimony. He warned lawmakers that although government action has launched economic recovery, the sluggish job market is still a concern.

He reiterated that the Fed's benchmark lending rate, which impacts the price of consumer loans, will continue to hold near zero. It has stood near the historic low since December 2008.

Last week, the central bank raised its discount rate, which is what banks pay to borrow directly from the Fed, to 0.75%. The move sparked hopes among investors that the Fed would tighten monetary policy and raise the benchmark rate sooner than expected. That confidence pushed the dollar higher against its rivals.

The dollar also came came under pressure Wednesday when recovery doubts were boosted by a report that showed new home sales plunged in January.

A jittery economy and an excess of foreclosed homes pushed the annual rate of new home sales to 309,000, the lowest level since the government began keeping records in 1963. The drop surprised analysts, who expected sales to surge because of the homebuyer tax credit, which runs through the end of April.

What analysts are saying: "The dollar has fallen across the board in response to Bernanke's initial statements," said Kathy Lien, director of currency research at Global Forex Trading. "The fact that Bernanke is not entirely optimistic about U.S. economic recovery and the fact that he did not telegraph additional tightening proves to be disappointing for dollar bulls."

Lien said the dollar has rallied since the middle of February on the chance that the Fed would be more aggressive than other central banks, but Bernanke's comments suggest that the central bank will not be as aggressive as previously hoped.

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